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PROPTECH-X ‘Proptech & Property News’ Weekly Roundup: Propflo | NAPB | Bank of England | NRLA

What now for the property sector after another interest rate increase?

Though many had flagged that the wise committee at the Bank of England would increase the interest rate to 1%, climbing 0.25 percentage points from the previous 0.75%, the bigger worry is the 10% plus headline inflation rate and what is set to be a further hike to the base rate.

In 2009, in response to the most recent financial crisis, the base rate moved swiftly down from 5.5% to 0.5% for seven years, then dropping down to 0.25%, briefly reaching 0.75% then dipping in pandemic 2020 to 0.1%. Amidst this, low rate mortgages have been the norm for many. 

Now we are in a very difficult position. The Chancellor stampeded the housing market by cutting SDLT for a known period, which caused a huge swell of completions 15% up on previous years and of course huge housing property price inflation.

If money remained cheap to borrow then the housing market could continue to prosper, but if interest rates rise to 2.5% by the end of 2023 as many economists are suggesting, then the overblown residential marketplace will suffer even more. 

High property prices and borrowing at a level not seen for over a quarter of a century, plus the cost of living crisis, and I think that moving home may well become the preserve of the hatched, matched and despatched for some time to come.

The Bank of England, and its sometimes arbitrary logic surrounding where the base rate should be to keep the economy on track, now has to deal with the realities that lie before it. Not least Russian aggression, supply chains still being hit by the fallout of the pandemic, which itself is flaring up again across the globe.

The housing market has always been a barometer of prosperity in the UK. When it is on an upward swing all related industries that feed off of it also do well. When there is a downturn people naturally sit on their hands and wait things out.   

Other clouds on the horizon are the hundreds of thousands who will be coming out of their two-year fixed mortgage deals in 2022 looking to lock into the best deal available. Well, if the base rate is 1.75% by the tail end of the year, mortgage lenders are unfortunately going to be adding quite a few percentage points to that figure. 

Will the housing market crash tomorrow? Probably not as there is a real shortage of inventory with far more buyers than houses to buy. But, once the first time buyers who last year made up 408,000 of the buyers of the 1.38 million-plus completed sales last year have done their thing, will the second half of 2022 be a vendors’ or a buyers’ market?

If mortgages are expensive, buyers become surprisingly picky. In a buoyant marketplace buyers are forced to buy or miss out, but if the market tempo slows then those problematic properties in not so a desirable locations may languish for some months.  

Michael Gove will have his work cut out now if prohibitively high property finance chokes off the appetite of the public to buy property. 

Despite all the soundbites about building on brownfield sites, looking again at planning and the need for 300,000 new homes a year to be built, this may all come to nothing if no one can afford to move.

If Section 21 is repealed, what does it mean for landlords and tenants?

It came as no surprise that Polly Neate, CEO of Shelter has been agitating again, saying that the body of tenants in the UK are living in limbo with no certainty of tenure, calling for the government to make good on the repealing of Section 21 – the so-called no-fault eviction mechanism that gives landlord’s their property back. 

Equally unsurprising is that Ben Beadle, CEO of NRLA, a body that represent nearly a 100,000 landlords, has asked that the charity Shelter reins in its outrage and sits down to actually suggest a framework that works for both tenant and landlord, when there is a need for a tenant to exit. 

Having been a landlord and a tenant, and having run lettings agencies, plus now dealing with a large number of lettings based property technology companies, I have a 360-degree view on most of what goes on in this vertical, both in the UK and globally. Things are never black and white.

But in an open letter to Polly Neate (see below), Beadle actually states NRLA is not opposing the repeal but wants there to be in place a solution, and it is reproduced in full as it teases out a lot of misconceptions that surrounds the relationship between landlords and tenants who exist in a symbiotic relationship supporting both stakeholders. 

For balance, Shelter which now turns over £60 million a year, quite something for a non-profit organisation that has its roots in the 1960s, and whose genesis was and still is very much London centric, does admirable things. But its voice should, in my opinion, be tempered with solutions rather than populist soundbites. 

Landlords are not the enemy and neither are tenants, but from time to time there is a need to have a sound mechanism that protects the rights and privileges of all stakeholders. 

NAPB: The Cost of Living Squeeze Is Set to Create a “Crisis” for Those Looking to Rent a Home.

The National Association of Property Buyers (NAPB) say soaring numbers of landlords are looking to sell homes as they seek to benefit from the continued surge in house-prices.

They say many are also looking to quit the rental sector due to sweeping new Government plans seeking to crackdown on their powers. 

Last week Ministers vowed to press ahead with moves to end  “no fault eviction” notices which means a property owner does not need to give a reason for ending a tenant’s contract. 

According to Shelter, 270,000 people have been served with such notices over the past three years in a situation they branded “appalling”.

However the NAPB say although it is vital tenants’ receive better protection the timing of the measure risked creating turmoil for people to look to find a rental property.

Spokesman Jonathan Rolande said: “The cost of living squeeze coupled with house price rises is leading to a rising number of landlords now quitting the market.  Our association has seen a sharp rise in the number of landlords now looking to sell, because very often they can get a better price for selling an empty property, than by letting it. 

“It’s very important tenants renting a property have protection in place, but by imposing sweeping new powers at this juncture the Government also runs the risk of driving out large swathes of landlords in one go.

“The net impact will mean less and less affordable homes for people to rent. Rental prices in all parts of the UK are already sky high. But we are now facing a crisis for those looking to enter the rental market during the second half of this year.”

The average annual UK rental growth has reached a 13 year high, with rents increasing by 8.3 per cent at the end of 2021, new research recently revealed.

Renters now pay on average £969 per month – which is £62 more than at the start of the pandemic according to Zoopla.

As the cost of living crisis continues to squeeze households, the average rent now accounts for 37 per cent of gross income for a single earner, up from 34 per cent during most of 2021.

However, this brings the figure broadly back in line with the longer term average of 36 per cent as rental growth rises in line with wage growth.

Meanwhile, the overall increase in rents over the last five years totals 12 per cent, thanks to the decline in rents seen in some areas during the pandemic.

PRESS RELEASE: AI start-up Propflo secures £180k from strategic investors

Bristol, April. 29th, 2022. Bristol-based start-up Propflo has announced that it has successfully closed its pre-seed funding round of £180k from strategic investors to grow its property transparency platform.

The platform, which includes an ‘Experian-like’ proprietary property score that homeowners can add context to, as well as sustainability insights and support to prepare sellers and buyers, has generated significant interest amongst property professionals, especially mortgage intermediaries. The main objective of this funding round was to engage strategic investors with relevant experience to accelerate growth.

The round was led by Ying Tan, a successful founder and angel investor. After becoming one of the youngest VPs at Goldman Sachs, Ying created a substantial property portfolio before founding Dynamo in February 2006; he exited in May 2021 having grown the company to become one of the leading and largest mortgage brokers in the UK. Since his exit, he has become the non-executive chairman of Knowledge Bank, a multi-award-winning mortgage criteria search system.

Ying will join the board as a non-executive director to help grow and provide strategic direction, he will also be joined by his trusted colleague Penny Desborough who has been instrumental in many of his previous success stories. Active angel investor Robin Balen who has invested in successful proptech start-ups previously is also part of the round.

Ying Tan, Non-executive director:“Propflo is a super exciting opportunity for me. When I exited my business I wanted to back and empower the next generation of entrepreneurs. Luke already has an excellent proven track record, and has all the amazing attributes that I look for in founders. Propflo is a revolutionary product which has ambitious plans to disrupt the marketplace, to create a better property buying experience. This makes it incredibly exciting for me and compliments my other recent investments. I am delighted to be part of its next chapter of growth and the exciting journey that lies ahead.”

Luke Loveridge, Founder and CEO: “I really admire what Ying has accomplished in the mortgage intermediary sector, and his knowledge of both the mortgage and property markets will be a huge asset to Propflo. When discussing the opportunity with him I felt that our values aligned and we could work very well together to build a great business. I’m also delighted that Robin has also participated in the round; his advice in previous proptech ventures proved invaluable.”

Daniel Moyo, Co-Founder and Chief Data Scientist: “We’ve recently expanded our advisory board with Dr Mike Tipping who is a world leader in AI, he joined Verona Frankish formerly part of the leadership team at Mortgage Advice Bureau and current CEO at online estate agents Yopa.  Adding the market-specific and commercial experience of Ying and Robin to the business creates an even stronger best in class well-balanced team.”

About Propflo

Propflo is a property transaction transparency and decision support platform powered by machine learning (a form of artificial intelligence). It was founded by successful proptech entrepreneur Luke Loveridge and geospatial and risk data scientist Dr Daniel Moyo. The business has a strong advisory team including the CEO of Yopa and ex-Purplebricks MD, Verona Frankish, and Dr Mike Tipping – a world-leading AI expert.

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Andrew Stanton Founder & Editor of 'PROPTECH-X' where his insights, connections, analysis and commentary on proptech and real estate are based on writing 1.3M words annually. Plus meeting 1,000 Proptech founders, critiquing 400 decks and having had 130 clients as CEO of 'PROPTECH-PR', a consultancy for Proptech founders seeking growth and exit strategies. He also acts as an advisory for major global real estate companies on sales, acquisitions, market positioning & operations. With 100K followers & readers, he is the 'Proptech Realestate Influencer.'